BINDER VOL 43 No. 3 FALL 2018

VOL. 43 NO. 3 - FALL 2018

AIA WOMEN’S INITIATIVE MERGERS & ACQUISITIONS

THE PROBLEM OF ILLEGAL CHARTER

IN THE ON-DEMAND AIR TRANSPORTATION INDUSTRY

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IN THIS ISSUE Editor John Murray

Murray, Morin and Herman

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02

President’s message

UNDERWRITER DIRECTOR’S REPORT

04

EDUCATION UPDATE

AGENT/BROKER DIVISION REPORT NEW OWNERS

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26

MERGERS & ACQUISITIONS

28

AVIATION HISTORY REINSURANCE

ATTORNEY DIRECTOR’S REPORT

08

32

REGIONAL RECEPTION RECAP

REINSURER’S REPORT AVIATION IS GETTING SAFER

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2019 ANNUAL CONFERENCE

INDUSTRY NEWS THE PROBLEM OF ILLEGAL CHARTER

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CLAIMS REPORT

The ideas and opinions expressed by authors of articles published in The Binder are wholly their own and do not necessarily represent those of the Aviation Insurance Association.

The articles are not provided as legal advice.

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Published by the Aviation Insurance Association 7200 W. 75th St. Overland Park, KS 66204

PRESIDENT’S MESSAGE Paul Herbers - AIA PRESIDENT, Cooling and Herbers

THERE’S A LOT HAPPENING, SO PLEASE

T

GET INVOLVED

his has been quite a year for the AIA so far with more to come. There is much to report, and you will find in this issue of The Binder a very impressive collection of articles and announcements. Your board is active and we seek your participation We are very pleased to announce several new initiatives, including the Women’s Initiative and Young Professionals. These groups will be inviting your participations and setting their agendas for the coming months, and we look forward to great things from them.

We announced last year that the board had sharpened its efforts to focus on membership – attracting new members to participate in AIA activities, not only at the annual conference but throughout the year. That effort is expanding and accelerating.

Our program of regional receptions last year included visits to Dallas, Atlanta and Santa Monica, along with our long-established biennial trip to London. This year, as you will read in this issue, we have visited Toronto and Chicago.

In Toronto we offered 4 hours of accredited continuing insurance education from a group of superb Canadian presenters along with our reception. We are particularly indebted to our member Belinda Bryce and Director of Underwriters Greg Sterling for providing the inspiration and initiative to make this special event happen.

In Chicago we enjoyed another excellent presentation and reception, and we are particularly indebted to our members Alan Farkas and Michael McGrory for their valuable energy and assistance in putting that fine event together.

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The networking, educational opportunities, and fun in these regional events have been most enjoyable and encouraging.

We have been delighted to meet so many new professionals with an opportunity to invite them to join the AIA.

As we earlier reported to you, the AIA submitted a Friend of the Court (Amicus) Brief to the Montana Supreme Court in September on a topic of widespread interest, being the potential “stacking” of liability coverages in a general aviation aircraft policy. A more detailed discussion and copy of the Amicus Brief are now available to members on the AIA website. As this is written, oral arguments to the court have not yet taken place, but we will keep you updated on developments.

In addition, we have expanded our goals for membership and educational programs with the assistance and guidance of our good friends at Onyx Management, including our Executive Director Mandie Loroff. You will see a number of developments in the coming months relating to our social media platforms, our website upgrades to our Members Only page, our video offerings of conference presentations, and more.

The AIA Education Committee is also in full drive, having completed a full CAIP course in Chicago and preparing for the Asheville CIE sessions, as well as its numerous other initiatives. Chairman Eric Barfield’s excellent report is included in this issue as well.

The opportunities for you to share actively in our future programs and direction are growing rapidly, and we invite you to inquire early and often about what you might do!

Your participation helps us all, so please let us know of any interest you have to contribute to AIA’s future.

-Paul Herbers

AIA Forms

Young Professionals Group First Face-To-Face Meeting Held During 2019 AIA Annual Conference

Luke Uithoven - AIA Director-At-Large

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he idea of the Young Professionals Group within the AIA came about as a by-product of the AIA membership drive and regional receptions over the past couple of years. We realized that there is a growing group of young professionals in the Aviation Insurance industry that are either just starting their aviation insurance career or are simply new to the AIA. The resounding response from these young professionals is that they are looking to become involved in the AIA as they see it as an avenue to grow their career via education and networking. The AIA Board formed this group as an avenue to help these members find a role

within the AIA and help them facilitate success in their careers through what the AIA does best, education and networking.

We encourage you to join our Young Professionals group which will meet for a Social Hour at the Grove Park Inn on Friday evening, May 3rd. Whether you are young or young at heart, new to the industry or AIA, or have been an AIA member for a few years and are simply looking to get plugged in, please join us. We will have a short informational session followed with social networking.

Additional information, including location of the event, will be available soon.

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AGENT/BROKER DIVISION REPORT

NEW OWNERS CHRIS ARNOLD - Director-Elect, Agent & Brokers Division , Sutton James, Inc.

I

n the current climate we live in as aviation insurance specialists, it seems like every other week there is a new rumor of a merger or acquisition.

This can be a very turbulent and stressful time for everyone involved. While I’ve opened with these words in the last two articles, it isn’t only to save time and take up space; although I must admit that certainly is a plus. These words are just as true many months later. The acquisition phase that we are in does not seem to be slowing any time soon.

I have spoken with various people who have gone through this process to gain a wide array of perspectives to share with the community in hopes that their experiences will help those who may be going through this same process.

For this article I will focus on the new owner who is looking to purchase the agency. Again, there is an emphasis on those agencies which are meant to keep operating not those whose accounts have been sold off. All names have been left out for the sake of anonymity.

The buyer of an agency needs to realize that the true value of an agency is the bottom line profit that

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the agency generates. While this seems like an obvious statement it is easy to become fixated on the top line revenue numbers. Two agencies with equal commission revenue can have drastically different profit margins. This becomes especially critical for an agency sale that is expected to be paid through the operational earnings.

The acquisition of a small agency can be complicated by the lack of technology. The seller may not be able to produce all of the data that the acquirer would like to be able to review. The agency has run at a profit and they have always been able “to keep the lights on” so the additional level of detail was not necessary. A number of small agencies are run by aviation professionals who happen to own a business. Aviation is their true passion. In the current climate, these agencies are being acquired by businessmen who happen to be buying an aviation-based business. This is a very important distinction for everyone involved to remember.

While going through the sale; it’s easy for buyer and seller to focus on transitioning the account relationships and fending off competition during this vulnerable period, without taking into account the

fact that a number of factors other than the relationship and competition can cause an agency to lose a large account at any time. Operators may close down operations, government contracts may be canceled, any number of unforeseen and unfortunate circumstances may occur that are beyond the control of the seller or buyer. To help account for this a buyer must take a look at the agency’s top accounts and how much revenue they are responsible for and if the agency is top heavy. While the prestige and revenue of a large account is nice while you have it; the consequences of these accounts going away can have a drastic effect on the numbers.

Given that almost all policies in our industry are agency bill, a buyer must review the aged accounts receivable process and history. If a buyer is used to direct bill and expects payment at policy inception there may be potential issues if the seller has a liberal payment policy. Of everyone I spoke with, even those with relatively strict payment policies have customers that they’ve made exceptions for in the past. Once these exceptions have been made, the customers seem to feel entitled to them in the future as well. Any drastic shifts in payment structure can have a detrimental effect on account retention. An owner who isn’t used to looking at aged receivables may be in for a bit of anxiety when they first start reviewing.

The buyer who has paid good money for the agency will be looking for ways to increase the return on their investment. They may be looking for both organic growth and cross sell opportunities. The ability to develop existing relationships for cross selling other lines to the clients can be particularly important in making any given agency more desirable. The increased focus on sales and sometimes not-so-subtle pressure to grow the agency might surprise some but this is really how the acquiring company is able to fully realize their own return on investment.

As for advice, communication is key for both the seller and the buyer. Your employees are the life the life blood of the business. Although this may be a business transaction for you, this is the livelihood of your employees and their families. There will be fears and uneasiness. To the extent possible, whether before or after the sale, you must answer their questions and address their fears. Rumors fuel fear so better to address it with your team honestly and openly as soon as you are able to. In aviation insurance, most employee positions can’t be readily replicated so there’s a good chance the acquiring company will need and want to retain most all employees. Best to have everyone on the same page. Get to know your new employees and build a relationship with them.

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ATTORNEY DIRECTOR’S REPORT

NICOLE STOUT - Director of Attorneys’ Division

W

e have some exciting news to announce! We have formed the AIA Women’s Initiative, a group aimed at boosting women’s membership and participation in AIA. The current AIA membership consists of 18% women. While we understand that the membership percentages are partially a reflection of the industry as a whole, we would like to create space within AIA for leadership opportunities, programming and events that will appeal to our women members and potential members. We are working on an additional offering for the Saturday morning of the Annual Conference for those that do not play golf or participate in the skeet shooting. Our goal is to create more networking opportunities for everyone so

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that they can get the most out of the conference. Another idea that we are working on is to create a platform for additional ways to get involved in AIA. Currently, our Education Committee is robust with active participation from its members, which consist of professionals from all of our divisions. Looking to the future, we would like to create more active committees for the membership as a whole that encourage involvement and active participation in AIA. We will be sending out a survey to gauge interest in the Women’s Initiative and to get ideas on how we can be a resource for our female members. We welcome any ideas from our members to help make this Women’s Initiative a success.

As many of you know, the AIA recently filed an amicus curiae brief in the Supreme Court of the State of Montana, in the matter of U.S. Specialty Insurance Company v. The Estate of Darrell L. Ward et. al. (No. OP 18-0373). An amicus curiae brief is submitted by a person or entity that is not a party to the litigation but offers the brief as insight or to provide information to assist the court in making the determination. “Amicus curiae” is Latin for a “friend of the court.” The issue being considered by the court is whether or not stacking of general aviation insurance liability limits should be permitted.

Given that the issue is of profound significance to our industry, the Board elected to file the amicus brief. The brief was circulated to the membership by e-mail. If you did not receive it and would like a copy, please let us know.

It is important for us as the leading aviation insurance association worldwide to monitor legal developments and provide our collective expertise when appropriate. Our Attorneys Division members are often on the front-line litigating matters of first impression, or gray areas in the law or insurance policies concerning aviation insurance. At times, creative legal theories are made to test and explore potential ambiguities in policies. It is important for our division to stay on top of legal trends and to be an active participant in issues that may affect our industry as a whole. If you have a case involving a legal issue where the Court may benefit from our membership’s expertise, please reach out to me directly for consideration of preparation of an amicus brief. We have the most knowledgeable collection of aviation insurance professionals in the world and we want to tap into that knowledge to educate, inform and advocate for our industry.

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REINSURER’S REPORT

Aviation is getting safer what does that mean for GA insurance?

Walter Voigts-VonForster. - MUNICH RE

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017 marked the record year during which there were no fatalities from any passenger airline accident.

This continued a trend of airlines improving their safety track record resulting in less accidents, in particular fatal ones, whilst growing the industry overall.

craft data is per the latest available FAA survey from 1 2016 and the loss data is taken from the NTSB data2 base .

The record year of the airlines sparks the question if general aviation aircraft follow the same trend. To review this, and what implications that may have for the aviation insurance industry, let’s look at the largest GA market, the US, which has good data publicly available to investigate this question.

Let’s start with fixed wing piston aircraft, lumped with experimental and special light-sport aircraft. The number of accidents by level of injury is shown in Figure 1.

At a first glance the record looks good: whereas in 2005 there were 1457 accidents, 2016 is down to 1130. But obviously the simplistic conclusion for insurers that this could justify rate reductions in line with reducing accidents is misleading, since the underlying population of aircraft is changing over time.

To set the scene: the following analysis will review GA fixed wing aircraft by engine type. The underlying air-

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The bulk of aircraft in the US: fixed wing piston

So we’ll relate the losses to the number of aircraft estimated by the FAA to have been active during this time span, a figure which is slowly decreasing, see Figure 2. The line representing the number of all accidents per 1000 aircraft shows a pattern which we’ll come across several times: from the mid-2000s compared to recent years an improvement in loss frequency is visible. However, the last four years appear to be pretty flat (or randomly fluctuating) in their movement, showing neither a clear trend up or down.

If we drill down to those losses which resulted in an injury or fatality, we see a static line representing about two accidents per 1000 aircraft.

So what does this imply for the insurance of this sector?

Loss frequency - at least at the level investigated by the NTSB (there will be more insured losses than are investigated) - is fairly constant. For the severity of such losses no conclusions can be drawn from this. Assuming hull values in this segment are fairly static as well, and liability payments being mostly paid out at the standard policy sub-limits given per passenger in this class, one would presume the overall

1 2

https://www.faa.gov/data_research/aviation_data_statistics/general_aviation/CY2016/

https://www.ntsb.gov/_layouts/ntsb.aviation/index.aspx

Selection: all aircraft flying under FAR part all other than 121, also excluding non-US aircraft and armed forces. Events classified as “accidents”, excluding “incidents”.

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annual loss burden to be stable. So any rate reduction should directly translate into a deteriorating loss ratio for underwriters.

Higher values, more often professionally flown: fixed wing turboprop Piston aircraft may represent the majority of active aircraft in the US, but underwriters and brokers alike may have a bigger interest in the higher valued turbine powered aircraft, so let’s look at the data for the turboprops first. Surely such aircraft, more often flown by professional pilots than piston aircraft would be, should bene-

ment, but the results of underwriters in recent years won’t be shifted much simply by this trend.

At this point you might raise the question if the number of aircraft is the best exposure measure to relate losses to. The hours flown could be considered more relevant to the number of losses. That data is also available from the FAA, however it’s closely aligned to the number of active aircraft and therefore that comparison doesn’t yield a different picture. And since aviation premium is typically linked to aircraft rather than hours flown, the frequency is measured on that exposure.

Jet aircraft are the closest thing to airline equipment

fit from improving safety standards over time.

Figure 3 shows the loss activity for this segment, indicating possibly a slightly improved track record in more recent years compared to a decade ago.

When linking the losses to the slight growth of aircraft over time the improvement in loss frequency becomes more visible. However, once again the trend from 2013 to 2016 is fairly static. Long term there may be improve-

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If our comparison of the airline safety track record hasn’t quite been mirrored by the type of aircraft often flown for PBP or commercial use, then surely jets should exhibit a trend to similar to commercial airlines. And indeed, the simple number of accidents already indicates this may be the case: Figure 5.

The growth in number of aircraft in this sector and therefore the corresponding loss frequency would indeed support the notion of a longer term safety improvement. But once again, the last couple of years exhibit a rather random occurrence of losses than clear downward trend.

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And as always the trend in frequency is only one part of the equation for underwriters. In particular for the turbine classes the severity trend is crucial: as aircraft become more expensive and more complex, hull losses more often become total losses, which previously may have been repairable. And for the liability exposure, typically insured by smooth limit policies, a couple of high profile unexpected liability awards in 2017 and 2018 have highlighted a trend for increased loss cost that will not be offset by small improvements in frequency.

provement of loss frequency prevalent in recent years compared to the levels of the mid-2000s. However, since in recent years the loss frequency trends show no clear pattern, in my view the question underwriters should ask themselves is not if an underlying general trend may justify a few points of rate reduction across a portfolio or not (and in my view that data wouldn’t conclusively support that). The crucial anchor point of any argument on rate movement should be the adequacy of current premium levels.

Which parallels can be drawn to the airline insurance market then?

Walter Voigts von Forster is the head of aviation reinsurance at Munich Re wvoigts-vonforster@munichre.com

Like in the airline sector, there has been a marked im-

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INDUSTRY NEWS

The Problem of

Illegal Charter

in the On-Demand Air Transportation Industry

DAVID T. NORTON - Shackelford, Bowen, McKinley & Norton, LLP

A

ircraft dry leasing can be a tricky subject, but it is not inherently bad. Dry leasing is, in fact, how the vast majority of charter operators flying under Part 135 gain access to most, if not all, of their fleets. They generally don’t own all of their aircraft, but instead obtain them under dry leases from owners who want those aircraft to be operated under Part 135 for any number of valid reasons. Moreover, when set up correctly, dry leasing is also an important tool for the appropriate non-commercial use of aircraft in the business aviation community.

The conventional wisdom, however, is that a growing number of individuals or companies are setting up what are purported to be Part 91 dry leases, when they are in fact “wet” leases that should be operated under Part 135. (Continue reading for definitions and distinctions between the two types of leases.)

Why is this happening? Consider that if your neighbor down hangar row is operating their own flights under a Part 91 dry lease, then that operator does not need to obtain an air carrier certificate and fly the aircraft under Part 135. That operator can instead conduct flights that cost less and are less restrictive than the flights you are conducting under the authority of your air carrier certificate and in full compliance with Part 135.

So, what is the big deal? Well, if that operator down the tarmac has set up a true dry lease and is flying its own employees and

guests as passengers on the aircraft in support of its own business operations as a legal non-commercial operator under Part 91, then it is not a big deal. But, if that operator is instead using what purports to be a dry lease in order to conduct a cheaper, more flexible flight under Part 91, but that flight is, in fact, an illegal charter operation for the benefit of unsuspecting third-party passengers that should by conducted under Part 135 instead, then it is a very big deal because: (a) it leads to significant passenger-safety and regulatory noncompliance concerns, and (b) it creates an extremely unfair playing field for those charter operators who do choose to actually comply with the law.

“DRY” LEASES, “WET” LEASES, AND “ILLEGAL CHARTER”

When you hear that an aircraft operator has a lot of dry leasing going on (or when you want to do your own dry leasing), how do you know whether true non-commercial dry leases are in place, or what is really going on is consistent with illegal charter? The answer to that question is really based on an analysis of a series of underlying questions. Continued on page 29 The first question is: Just what, exactly, is a lease? At its most basic level, an aircraft lease is simply an agreement under which one party— called the “lessor”—provides an airplane to

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another party—called the “lessee”—in exchange for some kind of payment. As a quick aside, many states typically recognize that any lease can be either verbal or written. The FAR, however, compels parties to use written leases for “large” aircraft (i.e. aircraft with maximum certificated takeoff weights of over 12,500 pounds) due to the truth-in-leasing notice provisions found at 14 C.F.R. Section 91.23. And, even though you do not technically need a written lease for “small” aircraft, it is still a very good idea to have one because it can be very difficult to establish that a verbal lease was really in place after the fact, especially if the flight is being reviewed by the FAA or some taxing authority long after it took place.

Once you have identified a situation where you have a lessor providing an airplane to a lessee in exchange for some payment, the next question is: Who is actually conducting the flight (i.e. who really has operational control of the aircraft) under that lease? Why this question? Because, as the FAA Chief Counsel has repeated on many occasions over the years, the FAA recognizes two general types of aircraft leases—dry leases and wet leases. The dry lease of an aircraft is one in which the lessor provides the aircraft, and the lessee supplies its own flight crew and assumes operational control of the flight. Conversely, under a wet lease, the lessor provides both the aircraft and the crew and normally retains operational control of the flight, in

which event the flight is considered to be commercial in nature and, except in a few very limited circumstances, must be operated under the authority of an air carrier certificate and under the applicable commercial rules, such as Part 135.

While that makes sense on an initial reading, how can you actually tell if the lease in question is dry or wet in real life?

Sometimes it is very clear. A charter agreement between a certificated air carrier and some third-party passenger that says the charter operator will take the passenger from point A to point B and all the passenger has to do is show up at the appointed time and pay a charter fee, is very clearly a wet lease.

On the other end of the spectrum, when the lessor is a bank that purchases an aircraft on behalf of a borrower, and that bank/lessor then leases the aircraft to the borrower as the lessee, who must take full responsibility for all aspects of maintaining and operating aircraft as if that borrower/lessee were the owner of the aircraft in the first place, that lease is very clearly a dry lease. The problem is, quite often, leasing is conducted between these two extremes and the question of whether or not those leases are dry or wet is not quite so clear.

How do you decide in these in-between situations? As the FAA Chief Counsel has also repeated on many occasions, whether a lease is dry or wet is determined on a case-by-case basis and

the FAA will look at multiple factors to determine whether a lease that the parties are calling “dry” is in fact “wet.” First and foremost, the FAA will look at who is providing the pilots. As 14 C.F.R. Section 110.2 states, the very definition of a wet lease is “the lease of an aircraft plus any one crew member.” So, if the lease in question specifically provides both the airplane and the pilots, then the matter is clear—that is a wet lease.

But beware—even in situations where a purported dry lease is entered into by the parties and it appears on the surface that airplane and aircrew are coming from separate places, but a review of the actual underlying facts shows that the plane and pilots are really being offered as a package deal, the FAA may find that the parties have really entered into a “sham dry lease”—a wet lease in disguise.

A review of applicable FAR sections; various provisions from FAA Order 8900.1 (Flight Standards Information Management System) such as the guidance to aviation safety inspectors contained in Vol. 3, General Technical Administration, Ch. 13, Lease and Interchange Agreements; various advisory circulars such as AC 91-37B, Truth in Leasing; and multiple Chief Counsel Interpretation Letters addressing this issue over the years all show that the key question in determining whether a lease is truly a dry lease is the analysis of whether operational control has been assumed by the lessee under that lease. These resources also describe various “operational functions” the FAA will look at to determine if the lessee has really assumed operational control of the aircraft. Examples of these functions include, among other things, a review of which party: »» is providing one or more of the crewmembers, »» is arranging for the training of those crewmembers, »» selects or assigns particular crewmembers for particular flights, »» employs and/or is directly paying for those crewmembers, »» has responsibility for determining the airworthiness of the aircraft, »» has responsibility for ensuring that proper maintenance of the aircraft is performed, »» has responsibility for initiating and terminating flights, »» has been specifically designated to be in operational control of the flight, »» is accepting regulatory liability and responsibility for the conduct of the flight, and »» is providing insurance and/or otherwise addressing any civil liability that can come out of a flight.

Other than in situations where the aircraft and aircrew are explicitly provided together, no one of these items is absolutely dispositive in and of itself. And although what the lease says on its face can be very important, the more these factors col-

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lectively point to one person (who, by the way, can be the lessor, the lessee, or even a management company or pilot who is in the middle and arranging everything), the more likely it is that this one person has assumed operational control of the aircraft. And, if that one person is not the lessee, then the agreement you are looking at is not a dry lease. Keep in mind the old saying: “if it looks like a duck, and walks like a duck, and quacks like a duck, then it’s a duck.”

A Chief Counsel Interpretation Letter issued as recently as December 28, 2017, summarizes the situation nicely: If the aircraft is dry leased, the FAA will conduct a casebycase analysis to determine whether the companies assumed operational control of the aircraft. The Agency will evaluate Lessee’s discretion to procure independent flight crews, and will look for any pattern of evidence that denotes that the parties to the lease agreement “acted in concert” through a combination of transaction or dealings to furnish a “leasing package” that includes both the aircraft and crewmembers. The FAA will consider who maintains liability for the operation of the flights, who conducts maintenance, and who dispatches the Aircraft. . . . The goal of conducting this analysis is to identify and prevent execution of “wet leases in disguise” which seek to avoid part 119 certification.

Ultimately, someone will have operational control of the flight.

If the lease has successfully transferred that control to the lessee, then the lease can fairly be called a dry lease. If not, then operational control resides with either the lessor or some other party (such as the manager); and, that person with operational control: (a) is most likely the very definition of a commercial operator—a person who transports persons or property for compensation or hire, and (b) most likely must obtain commercial certification and conduct the flights in question under the applicable commercial rules, such as Part 135.

Additionally, even when a true dry lease is in place, that does not necessarily end the inquiry. Just because a lessee has assumed operational control of the aircraft under a dry lease does not necessarily mean that the lessee can conduct its flights under Part 91. For example, if the lessee is actually a “flight department company” (as noted above), then that company would still need to obtain an air carrier certificate and conduct its flights under Part 135. Moreover, if a dry lease transfers operational control to a lessee, who then turns around and further leases the aircraft to others in exchange for compensation, then the first lease may be dry but the second one is most likely wet. In short, you cannot stop just at the level of the first lease, but need to drill down to the final operator of the actual flights in question to see if they can be conducted under Part 91 or must be conducted under Part 135 instead.

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CONSEQUENCES

What are the consequences of doing all of this wrong? First, from the regulatory standpoint—and keeping in mind that one of the FAA’s fundamental regulatory obligations is to protect the safety of passengers, especially when commercial operations are involved—you have to understand that the FAA strongly opposes commercial operations conducted without having the appropriate authority to do so. Such activity can, therefore, lead to some of the highest civil penalties available under the FAR— meaning penalties that can be in the tensof-thousands to hundreds-of-thousands of dollars by the time you are through. Moreover, depending on the particular circumstances, the FAA could also turn to certificate suspensions or even revocations for the airmen and agencies involved, and if the activity is intentional and egregious enough, the guilty individuals could be even looking at a visit to the local federal prison.

With respect to civil liability consequences, if an accident or incident occurs during a flight that is supposedly conducted under a dry lease that is later determined to be wet, that operator may very well find itself in state court defending against significant claims for damages. Most states impose the highest standard of care against common carriers, such as those operators that are acting as commercial operators (whether they know it or not), which in turn makes it easier to find liability against, and to assess higher damages on, those operators. Now put on top of that the question of whether or not that operator’s insurance carrier will stand up and provide coverage under the operator’s non-commercial or business-and-personal use insurance policy after the FAA has determined that the flight in question was actually an illegal charter flight, and the operator could end up being in a very bad place.

Finally, illegal charter activity creates a significant threat to the air charter industry, and, therefore, to the entire traveling public. It creates an unfair playing field that arguably encourages people to not follow the rules, or drives those operators who are trying to follow the rules out of business because they cannot compete with the operators who do not. That, in turn, reduces the relative number of safe charter operators that are available for the traveling public to pick from. Again, this is not to say that all appropriate dry leasing is bad. But sham dry leasing can be very bad for those persons who have no idea what is going on with the aircraft and simply want to pay someone to get them from point A to point B.

CONCLUSION

What is one to do? First and foremost, educate yourself enough to know what the proper parameters are for true dry leasing.

Second, if you are inadvertently conducting flights under Part 91 through improper wet leases that should be flown under

Part 135, either fix it or stop conducting those flights for all of the reasons noted above. Finally, if it appears that someone else is conducting Part 91 flights under what are really wet leases in disguise, then call the FAA and let them know. One of the FAA’s key responsibilities is to enforce its own regulations, and this is one of the most important regulations in place. But FAA aviation safety inspectors are not, and cannot be, everywhere at once; they often need a hand if there are bad actors out there who are not doing it right. At the end of the day, for the sake of the safety of the traveling public—and for the sake of those industry members who are actually doing it right—let the FAA know of potential violators so they can check to see if, in fact, those dry leases are just a little too damp.

Rule Marketing Committee. He was a regular commissioned officer in the U.S. Air Force from 1984 to 1993, serving primarily as a KC-10A pilot and aircraft commander, and currently holds FAA certification as an airline transport pilot (multi-engine land) with a DC-10 type rating, a commercial pilot (single-engine land), and as certified flight instructor, instrument and multi-engine, and advanced ground and instrument instructor. Please feel free to call him directly at (214) 780-1407, or email him at dnorton@shackelfordlaw.net, if you have any questions concerning the article.

issues. He is very active in many business aviation industry- related commit-

This article follows another that appeared in the First Quarter 2017 edition of the Aviation Business Journal, which discussed the “operational control” of aircraft under the Federal Aviation Administration’s (FAA) federal aviation regulations (the FAR). That article noted a number of problems that can arise from confusion over the concept of operational control, sometimes leading to improper “Part 134 ½” operations, such as using a solepurpose “flight department company” to be the liability-shielding operator of an aircraft under 14 C.F.R. Part 91 for the benefit of that company’s members when those flights should legally be conducted under 14 C.F.R. Part 135.

This current article focuses on another type of operation that is also intimately intertwined with the concept of operational control—the non-commercial, or “dry” leasing, of aircraft.

tees and groups, such as serving as Industry Co-Chair of the joint FAA/Indus-

© 2018 All Rights Reserved

David T. Norton is a partner and head of the aviation practice at the law firm of Shackelford, Bowen, McKinley & Norton, LLP, in Dallas, Texas. He holds a B.S. from the USAF Academy, an M.B.A. from the Louisiana Tech University, and a J.D. from the Southern Methodist University Law School. He has an internationally recognized practice that focuses exclusively on business aviation industry regulatory, transactional, tax, dispute resolution and risk management

try RVSM LOA Process Enhancement Team of the Performance based Advisory

17

CLAIMS REPORT

Always Trust Your

Second Impression (or Third)

STEVE MAGGINETTI - CONSULTANT

H

uman factors is a fascinating field of study. Principles from this discipline are well known, such as pilot reaction times to identify and correct problems, task overload, the shape of certain knobs in the cockpit (like a wheel shaped lever for landing gear and a flat lever to indicate flaps), and etc.

Human Factors is the study of how we as humans respond in particular ways to certain situations.

In the area of accident investigation, we all like to think that we are looking only at the facts, and that we approach the investigation without any bias. After all, as Westerners we usually base our lives on the fact that we are logical, and just a short step in evolution from being Mr. Spock. Regretfully, this is not the case (except for Leonard Nimoy).

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In recent years, many psychological studies have been done to research the question of how people make decisions. The rather shocking short answer they found is that when people are called upon to conclude what the origin of a problem is, that their decision is generally immediate, and based mainly on their emotions or previous experience. And even more distressing to our investigative application, this decision may change over time with the input of other information or competing theories being expressed, which are also often based on emotions.

I regret to inform you that we all (official investigators, consultants, adjusters, and attorneys) can start our evaluation phase with bias and prejudice. Following our immediate “conclusion”, unless very careful, we can then look for evidence that supports our reactive conclusion made earlier. This really surprised me since I have always thought of myself as being fairly unbiased and rational.

During my aviation accident investigation courses in human factors, I have always remembered what one of my instructors, a very qualified former NTSB investigator, kept repeating this important point: Accident investigation is very complex and many disciplines are needed. We have spoken of them, worked on checklists, the process of ruling out other causes, and at last, coming up with a final solution. However, the most important truism in investigation is to always remember; in most cases your first instinct as to what happened in the accident chain is usually wrong.

As an accident investigator I instinctively tend to fall back on my 40 years of experience of turning wrenches on aircraft and seeing failures that are repeated in certain aircraft. This has been a potential trap for me, and on more than one occasion as I saw that the root cause was something that my instinct did not always consider, at least not at first.

An investigation that changed my way of thinking for the better Several years ago, I was observing a tear-down of a reciprocating engine. The engine had a broken connecting rod along with the ubiquitous hole in the top of the crankcase. This engine had been overhauled about three years prior, and had around 400 hours in operation since overhaul. A failed connecting rod is fairly common, and some engine models are more prone to them than others. The immediate conclusion I made was either a loss of oil, defective hardware, abuse by the operator, or possibly deficient, or poorly executed maintenance.

In this investigation I was, as usual, going through my checklist searching for telltale signatures of fatigue failure vs overload failure, looking for chafing of the crankcase halves, bearing failure signatures, researching maintenance history and looking for oil flow restrictions to the main and connecting rod bearings. But I found no “smoking gun”, only a lot of secondary damage and no root cause. The question that kept haunting me was why it had failed in such a relatively short period of time since its overhaul.

That night back at the hotel as I was looking at my photographs and reviewing the day’s investigation, I suddenly had an epiphany that I needed to look not for what was there but what wasn’t there. I then saw in my series of photographs of the main bearing saddles that each bearing saddle had an oil supply hole drilled into the crankcase to the main oil distribution galley, but there was one saddle that had no oil passage drilled to the bearing saddle!

Thinking I had gotten my photographs out of order, I went back the next day to double check, and sure enough there was in fact no oil delivery passage to bring oil to that main bearing. This main bearing, illustrated below, supplies oil to the failed connecting rod. The crankcase had been overhauled properly, except that the re-drilling of the oil passage did not take place!

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Fortunately, the overhaul shop had several of the same model engine in various states of disassembly, and I could quickly verify that there was in fact supposed to be an oil passage drilled on the subject engine.

Since the oil passage was to deliver oil to only one main journal, the engine thankfully continued to run with the splash lubrication on that bearing.

Who would have thought to look for this? How could an engine run for 400 hours with no oil to a main bearing? But, once found, it was clearly the cause of the failure.

Typical bearing saddle; yellow indicates oil passage, red arrow indicates dowel pin to secure bearing shell and prevents spinning of the bearing, no oil flows through this pin.

In this example I was looking for the traditional causes of such a failure, but was not able to step back long enough to see the obvious problem. It was admittedly an unusual finding, but it was the root cause none the less. That would never have been my first item to investigate (but was on my next oil starvation case).

How to Not Be Fooled by First Impressions I have learned that unfortunately I can’t stop making prejudicial first decisions. I am simply wired that way as a human being, as my instructor taught me so well. So what can we all do then to overcome this tendency?

Bearing saddle with only dowel pin to secure bearing. No oil flows through this pin. Oil port is not present on this bearing saddle.

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To begin with, for the investigator or adjuster in the field, the first necessary step is to simply

memorialize the condition. For me, that means I take way more pictures than I think I need (fortunately I no longer have to buy film), as this helps me answer or verify questions that may come up later. I also remember that when I am inspecting a site and wreckage, that I am focused on that task, and I can’t think of all the questions that need to be answered at the same time. The whole chewing gum and walking thing.

Secondly, I always get a copy of all the maintenance records including those bothersome yellow tags stapled in three times and upside down, and the FAA Form 81303’s, along with supporting invoices and parts lists if available. I also always get the FAA Airworthiness and Registration file (a $10.00 investment). I have many times seen an aircraft that had major repairs with no logbook entries but someone filed an FAA Form 337 to Oklahoma City. I have also seen more than once an aircraft that spent many years in an obscure part of the world, and the only indication of significant remedial maintenance was only found in the FAA’s registration and the sales records.

Thirdly, I then put everything aside and do a few other things unrelated to the investigation (like dinner, going fishing or getting a good night’s sleep), but I would recommend no longer than a day. Then I have a fresh set of eyes to look again at my notes and photographs.

And finally, last but not least, I talk to someone who might know a little more than I do about a particular topic if I find it necessary.

I often have a few conversations a week that I never charge for from my clients, and gladly make a quick review of their data, answer questions, and act as a sounding board. Sometimes I know the answer they seek right away, or I may have a referral for them for source material, or the name of another person who can help them better.

Taking these steps together, we can all do a creditable job at overcoming our innate and unavoidable prejudices, at determining root causes, and at helping one another to improve.

And, we make a lot of great friends in the process!

Steve Magginetti is a native Californian with over 40 years of Aviation Maintenance experience. He has worked as a technical representative for Piper Aircraft, Inc. on the Cheyenne series aircraft, managed part 145 FAA repair stations that over the years were service centers for Mitsubishi, Piper, Cessna, Beechcraft, Hawker, Pratt and Whitney, and many avionics manufacturers. He has been a director of maintenance for several FAA 135 charter and air ambulance operations and has established several 135 operations from scratch. He currently works full time giving technical consultation to many insurance firms and is an active expert witness in aviation maintenance matters. He and his wife currently live in Pacific Grove, CA.

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UNDERWRITER DIRECTOR’S REPORT

MERGERS & ACQUISITIONS GREG STERLING - AIG Aerospace

U

nless you’ve been locked in your house binge-watching “Game of Thrones” for the past year or so, then like me you’ve probably watched with interest as a flurry of merger & acquisition (M&A) activity sweeps through our marketplace. Each week seems to bring news of a new trading arrangement, partnership, merger, or outright acquisition in the insurance industry as more and more companies seek to improve their capabilities and profitability.

Consolidation actions run the gamut in their form and function. They span a broad spectrum; from simple cooperative arrangements, to joint ventures, to mergers, to outright buyouts. The business motivations which drive these activities also vary. At the simplest level companies may form alliances which don’t include a combination of assets or balance sheets, but allow both firms to access needed areas of expertise in each other and penetrate new product areas or geographies. Joint ventures allow companies to combine these same capabilities and strengths into a brand new firm with shared ownership in order to achieve many of the same goals.

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Mergers take place when two separate companies combine their individual assets and financials to form a new entity. They differ from joint ventures or alliances in that the financials and workforces of the companies are combined as well. Cost savings can be achieved through the elimination duplicate resources in many areas including finance, accounting, IT and others, albeit often at the cost of displaced professionals and some internal “growing pains”. The merging firms may agree to combine their names in some fashion, (such as when Pricewaterhouse Coopers was formed by the merger of Price Waterhouse and Coopers & Lybrand) or they might alternatively agree to carry the name of a single merger partner. Finally, companies may create a totally new, unique brand and identity such as when Airbus was founded from the merger of Aerospatiale, Duetsche Aerospace, VFW-Fokker and Hawker Siddley. More often however, at least one of the prior entity’s names being retained so as to preserve name recognition and branding.

Issues can also arise if, prior to a formal merger, companies begin exchanging data, personnel, or functions.

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If done properly then pre-merger cooperative can be beneficial and allow many post-merger issues to be minimized – like a long engagement before the wedding.

In a similar way however, the premature mixing of personnel, functions, and operational intelligence normally reserved until after the merger can generate similar and often detrimental “matrimonial” challenges. When such cross-company activities are undertaken, they should be structured carefully to include clear expectations, lines of demarcation, and appropriate NDA’s. Otherwise companies who choose to participate in “pre-merger collaboration” without appropriate safe guards can face significant problems, especially if something derails the merger. Like the old song says, “Breakin’ up is hard to do”.

This brings us to the pinnacle of consolidation actions: acquisitions. These take place through outright purchase of one company by another. Recent activity shows that more insurance carriers are looking for (and finding) the right opportunities to use their access to capital to accelerate growth, gain market share, and reduce cost ratios through acquisitions. ACE’s 2016 purchase of insurance stalwart Chubb for more than $28 billion was one of the most dramatic in recent year. It was also notable in that the acquiring company (ACE) chose to move forward under Chubb’s name. Both companies committed themselves to the difficult but necessary integration work however, and as a result the ACE-Chubb merger has generally received very favorable post-merger reviews.

In the last year alone we’ve seen additional acquisitions amongst major insurance carriers, including Aetna by CVS, XL Group by AXA, Validus by AIG, and Novae by Axis to name but a few. When the right combination of synergistic capabilities are found in a target by a company with access to capital they will often present an offer at a significant premium to the current book value of the company and move ahead quickly. While the attributes of the firms acquired and the factors that influenced these actions varied, there were some common themes.

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AIG was attracted to Validus’ for many of the same reasons noted in AXA’s acquisition of XL in that both firms had established reinsurance capabilities, strong data analytics, and insurance linked securities asset businesses.

One of the most recent and notable acquisitions in the brokerage space is the pending $5.6 billion purchase of JLT by Marsh. Faced with a similar situation as many insurance carriers – access to capital and faced with challenges in growing its business organically - Marsh sought to leverage its capital holdings in exchange for accelerated growth and reduced internal costs. Based on available 2017 revenue data from Business Insurance Marsh will now stand at approximately $14.9 billion in brokerage revenue, extending its lead over No. 2 Aon by around $5 billion. While some natural attrition in staff is expected, the combined firms will initially marshal an amazing 70,000 employees worldwide.

The effects of mergers & acquisitions can be significant and can ripple through an industry far beyond the shores of the companies directly involved. These effects can present both opportunities and challenges to companies vying for the same business. Competitors can often capitalize on internal upheaval often created as business systems and work forces are merged, however they can also find themselves facing larger opponents with increased capabilities. A company may find opportunities to bring aboard individuals displaced or dissatisfied from the merging firms, or may face challenges in retaining their current talent who may be attracted by prospects within the competing firm. Insureds may view the transaction positively and seek to deepen existing relationships or establish new ones. They may also experience service issues during transition and seek alternatives. Whatever the micro effects however, at a macro level consolidation reduces the number of players in an industry which often has the effect of stabilizing pricing levels as the natural laws of supply and demand take hold.

So what do these mergers and consolidations hold for

underwriters and brokers in their daily trading relationships with their business partners? In many cases where acquisitions are more financial than managerial there initially is often little discernable effect, especially if acquiring companies allow a business to continue to operate autonomously. Often they will seek to avoid any disruption to the operations and attributes that made the acquisition target attractive in the first place. Assimilation into the new parent company can take place slowly, allowing for a natural transition with minimal disturbance. This arrangement is frequently seen with sole proprietors or family-owned firms, especially if the principals are seeking to liquidate their business prior to retirement. On the other end of the spectrum are outright purchases of books of business which are transferred directly into the new parent’s operation, after which the acquired operations are closed. This can often be challenging in the effects it has on client relationships, however the purchase arrangement in these cases usually assumes some level of expected attrition.

Purchase arrangements can be structured based on retained revenue and may include agreements whereby sellers remain on staff for a time, understandably motivated to maximize the final buyout figure.

Reductions in the number of trading partners and competitors can hold many positive effects. Brokers who once needed to send submissions to many markets now have fewer players they must access to cover the market fully. Likewise underwriters can streamline much of their back office costs which are required to maintain the numerous producer relationships, appointments, and licensure verification. As mentioned before reductions in the number of market players can affect pricing in a generally upwards manner, however new strategies and directions imposed by new parent companies can often work opposite, especially if the firms seek to grow more aggressively post-acquisition. On the brokerage side companies will sometimes attempt to leverage increased market share against compensation, however these are often met with resistance as simple aggregation of previously separate premium volumes does little to improve

business ratios.

American Humorist Frank McKinney Hubbard once said, “The safest way to double your money is to fold it over once and put it in your pocket.” While no sound business mind would hold such a lofty expectation of M&A activity, the clear financial benefits of carefully planned and well executed consolidation actions can be a powerful force in the right business environment. Recent activity within our industry certainly supports that we are indeed in such a time and as our market continues to evolve it’s reasonable to expect we’ll see additional M&A activity.

Business author Peter Drucker once said, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Any aviator knows the importance of maintaining aircraft control - especially in areas of turbulence. Many a pilot flying in unstable air has heard their old flight instructor’s voice echo in their head repeating that sage advice, “First - Fly the aircraft.”

As insurance professionals that same sound aviation advice holds true: Despite the turbulence, “First - Fly the aircraft” and adapt our businesses and operations to meet the needs of our respective clients & customers in the midst of the changing skies of our industry.

References & Acknowledgments: https://resources.globoforce.com/globoforce-blog/6-bigmergers-that-were-killed-by-culture-and-how-to-stop-itfrom-killing-yours https://www.institutionalinvestor.com/article/b14ywvqd6lb64f/evan-greenbergs-ace-in-chubb-clothing https://www.raconteur.net/risk-management/biggest-mergers-acquisitions-insurance https://www.insurancejournal.com/news/international/2018/09/19/501699.htm Business Insurance July 2018 – World’s Largest Insurance Brokers by brokerage revenue https://www.businesswire.com/news/ home/20180921005260/en/AIG-Acquire-Glatfelter-Insurance-Group

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EDUCATION UPDATE

CAIP PROGRAM ENHANCEMENTS

ERIC BARFIELD - AIA Education Committee Chairman

O

ne of the goals of your AIA Education Committee has been to make the Certified Aviation Insurance Professional (CAIP) designation more attainable for those who are not able to participate in the traditional classroom lecture format, especially for those members who do not reside within the United States. Two Committee working groups have therefore been created to address two distinct elements that need to be overcome in order to bring this goal to fruition.

One working group is our online/webinar team, headed up by Laura Heft, pilot and Associate at Butler Weihmuller Katz Craig, LLP, in Chicago, IL. This working group is tasked with analyzing digital possibilities for the Core Principles and Concepts course, which is the cornerstone of the CAIP program. At present, the

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only option for completing the course is an intensive three days of education and testing.

Extending AIA’s current offerings to a digital platform is a difficult and complex process, but the Education Committee feels this will be well worth the effort to increase access to our valued educational programming and to increase the overall number of CAIP designated professionals in the industry. The working group is excited to engage in this process and has planned initial proposals for the beginning of the 2019 year.

The other working group is co-led by Nancy Gratzer, Senior Vice President and Southeast Aviation Practice Leader for Marsh USA, and Belinda Bryce, Partner with The Magnes Group in Ontario. This team is hard at work

exploring Canadian and United Kingdom course equivalents as possible alternatives to the four (4) presently-required CPCU courses that each CAIP applicant must also have in order to qualify for their designation. While these CPCU courses are not often pursued by insurance professionals outside the United States, there are other rigorous professional insurance courses and credentials our international peers do pursue that could satisfy the intent of our CPCU course requirements.

AIA / CII Prize Award 2018

This working group also plans to deliver its findings and recommendations in 2019, assuring the high expectations and standards for achieving the CAIP credential are not diluted.

An additional step the Education Committee is making on the international front specifically is to present the Core Principles and Concepts course in London to coincide with the AIA’s biannual London Reception in November 2019. This course will be conducted in the traditional classroom lecture format, providing the first-ever opportunity for non-US aviation insurance professionals to participate without having to travel to the United States.

The AIA is committed to enhancing the aviation insurance industry worldwide and the professional lives of those who work in it. And since the Association does indeed have a significant international membership component, the Education Committee believes we should do all we can to make our industry’s coveted CAIP credential more readily available to them. At the same time, we understand the desire of more and more US-based insurance personnel who want to pursue their CAIP designation but are unable to attend the current three-day lecture format. These two teams are in fact doing great work to expand the reach and availability of the CAIP for both these groups of professionals.

AIA’s International Director, Bruce Carman awarded the 2018 AIA Education Foundation Prize for the highest marks scored in the CII’s Aviation Insurance examination to Catriona Divers.

Miss Divers received a certificate from the CII, together with a cheque for £1,000.

Bruce commented, “It was a great pleasure to award the Education foundation Prize to Cat, who clearly has an excellent understanding of the subject. The AIA are proud to sponsor this prize in recognition of students excelling in Aviation Insurance.”

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aviation history

A GUIDE TO

REINSURANCE IN AVIATION ALEX WELLS - AIA Education Consultant

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R

einsurance is used extensively in the aviation industry because of the high limits needed to protect against the unique catastrophic exposures. It can be defined as the insurance of an insurance company’s assumed liabilities.

Where insurance involves pooling the resources of similar exposures units to cover the losses sustained by individual entities, reinsurance is a natural extension of this process, whereby the risk takers spread their exposures to loss over a still wider financial base. It is easy to see how reinsurance agreements are used to allow insurance companies to write limits per risk higher than their financial resources would normally allow, to write unusual risks that are not common to their normal book of business. An insurer may wish to write high limits in order to compete with other companies writing similar airport accounts, or in order to write a particularly attractive account. Similarly, an account or a program may be riskier than an insurer generally writes, but by utilizing reinsurances, the insurer can limit and make its exposure to loss more predictable, thus making it possible to write the insurance. These uses of reinsurance are risk-bearing functions.

Equally important are purely financial functions of reinsurance. One of the limitations placed on domestic insurers

by A.M. Best, an insurance rating company, is that their premium writings should not exceed three times their policyholder surplus. This can severely restrict a small insurer with relatively low surplus or an insurer that has access to a relatively large book of business. However, by purchasing pro rata or surplus share reinsurance discussed below, small insurers can write more premium than their surplus would normally allow. Similarly, insurers that are growing quickly and writing a larger volume of business than they have surplus to absorb and stay within the three-to-one ratio can purchase surplus relief through the use of pro rata reinsurance. The main purpose of these purely financial reinsurance agreements is not to transfer exposure to losses to a reinsurer, but to transfer premium volume in order to keep the company’s net premium in line with regulatory norms.

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Treaty and Facultative Reinsurance

Treaty reinsurance is an agreement between the insurance company, or ceding company, and the reinsurer in which the reinsurer automatically assumes a portion of the ceding company’s liability on every risk written. A reinsurance treaty can be written to cover a broad spectrum of business that an insurer writes, such as a treaty covering all aircraft liability lines, or can be very narrow and specific applying to only a particular line of business, such as a treaty covering aerial applicators.

The terms of the reinsurance treaty are negotiated before the subject insurance is written. Generally, the reinsurer has no involvement in or influence over the underwriting of the insurance reinsured under the treaty after the treaty has gone into effect, provided the ceding insurer does not violate the treaty terms. This means that as long as the ceding insurer issues policies and covers only insureds that fall within the scope of the reinsurance treaty, the reinsurer has no authority to accept or reject the risks being insured. This authority is entirely at the discretion of the ceding insurer.

Facultative reinsurance is generally purchased on more hazardous or unusual risks like aircraft refuelers or unusually high limits required like major hub airports serving commercial jet traffic. Umbrella liability is a type of coverage that is usually reinsured through the use of facultative reinsurance due to the fact that coverage required higher limits than an issuing insurer or a treaty reinsurer is willing to commit on each type of coverage or each policy written.

2. There is also a difference in the pricing approach used to determine reinsurers’ premiums under treaty and facultative reinsurance. Treaty reinsurance is generally priced to reflect the fact that treaty reinsurance relationships are intended to be long-term in nature. If a reinsurer realizes an underwriting profit on a reinsurance treaty, there is generally a provision to allow the ceding company to share in this profit in the form of contingent commissions. Similarly, if reinsurance ceded is unprofitable to the reinsurer, treaties generally allow reinsurers the opportunity to recoup at least part of their losses by including underwriting deficits in future profit sharing calculations.

No contingency commission or similar pricing provisions exist in facultative reinsurance. Facultative reinsurance underwriters must price each agreement as if it would be the last opportunity to reinsure the risk, and that premium and terms must be adequate to generate an immediate underwriting profit.

Because facultative reinsurers deal with large, unusual, and hazardous types of risks, like those presented by aviation, they must accumulate profits from year to year to cover the potential catastrophic event in the future. Consequently, facultative reinsurers rarely return any part of their profits to ceding companies.

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Pro Rata, Excess of Loss, and Surplus Share Types of Reinsurance

The terms “pro rata” (or “quote share” as it is sometimes called), “excess of loss”, and “surplus share” define the basis of reinsurers’ acceptance of risk from ceding companies. With pro rata reinsurance, reinsurers accept specific percentages of shares of each policy written by ceding insurers, collect that same percentage of the total premium charged and pay that percentage of all losses incurred. Pro rata reinsurance is normally appropriate for purchases by small insurers writing a large book of low limits business, because that smallest loss may present a financial burden to these companies. Another situation in which pro rata reinsurance is appropriate is in the case of extremely volatile covers, such as pollution liability insurance where all losses are likely to be large losses and therefore all the participating underwriters need a proportionate share of premium to make the business profitable. Pro rata reinsurance agreements are usually rated on a gross rate basis, with the reinsurer paying the ceding company a ceding commission to cover the ceding company’s acquisition and operating expenses.

With excess of loss reinsurance, ceding companies retain all losses up to a certain level, and reinsurers absorb all losses in excess of that amount. Excess of loss reinsurance is generally used in situations where the ceding company can afford to absorb many small losses but would suffer serious financial damage if a large loss occurs. Excess of loss reinsurance is rated based on an excess limits charge appropriate for the type of business written. The excess limits charge normally corresponds either to increased limit factors, such as those developed by the Insurance Services Office, or the ceding company’s historical cost of losses in excess of its retention level.

One advantage of excess of loss reinsurance is that it allows the ceding company to retain the bulk or the premium charged for reinsured policies in order to pay smaller losses, while at the same time affording protection against large unpredictable losses. Accordingly, excess of loss reinsurance is most appropriate for insurers writing business where both frequency and severity of losses are reasonably predictable, and the cost of expected smaller losses can normally be recovered in the premiums charged to insureds. Premiums for excess of loss reinsurance are generally calculated on a net rate basis, meaning that there is no commission paid to the ceding insurer, and the prices of the reinsurance reflects only the reinsurer’s cost to provide the excess limits.

Surplus share reinsurance combines features of pro rata and excess of loss agreements. Under a surplus share agreement, ceding companies assume 100 percent of all losses up to an agreed amount. If a loss exceeds this amount, the reinsurer

will participate in the loss on a pro rata basis. Surplus share reinsurance agreements, usually written in connection with property insurance, are preferred by smaller insurers that wish to retain the majority of the premium they write and are willing to absorb small losses net but that require the kind of protection a pro rate agreement provides in the event of a large or total loss. The following illustration shows the different ways that pro rata, excess of loss, and surplus share reinsurance respond to losses.

Illustrations of Different Types of Reinsurance

Assume that an insurer, who has written an airport, purchases a reinsurance treaty with total limits of $200 million and retention of $20 million. If the insurer sustains a $40 million loss, the treaty will respond as follows depending on whether it is a pro rata, excess of loss, or surplus share agreement.

• Pro rata treaty. The ceding insurer’s retention would be 10 percent (20/200) of the total limits provided. The ceding company will pay $4 million and the reinsurer will pay $36 million.

•

Excess of loss treaty. The ceding company will pay the first $20 million of the loss and the reinsurer will pay the remainder.

•

Surplus share treaty. Because the loss exceeds the company’s retention level, the reinsurers in a pro rata position on the entire loss from the ground up.

As under the pro rata example above, the reinsurer will pay 90 percent of the loss and the ceding company will pay 10 percent. Thus, the ceding company will pay $4 million and the reinsurer will pay $36 million. In contrast to a pro rata treaty, the ceding insurer would have paid 100 percent of the loss, and the reinsurer would have paid nothing if the loss had been less than $20 million.

Retrocessional Agreements

Just as insurers utilize reinsurance to spread their risk and protect themselves from large or catastrophic losses, reinsurers also cede portions of their risks to other risk-bearing companies. This process is called retrocession and the risk-takers are called retrocessionaires.

Many reinsurers arrange working layer retrocessional treaties to participate in the limits they write. This further sharing of risk can add to the difficulty of assessing a reinsurer’s ultimate financial strength since it then becomes necessary to identify the retrocessionaires and evaluate their financial condition and stability. Often information about a retrocessionaires

writing a reinsurer’s treaties is not readily available. Therefore, when placing reinsurance with a company that does not retain its limits net, but rather uses retrocessions to provide its capacity, an extra burden of care is placed on ceding companies and their intermediaries. Under no circumstances should insurers place reinsurance with a reinsurer until a through financial evaluation of the reinsurer’s retrocessional arrangements have been made.

One of the advantages in doing business with the larger reinsurers in the U.S. market is that most of them are net line reinsurers. This means that they retain the limits they write net for their own account and only purchase retrocessions to protect their catastrophic exposure. As a result, the uncertainties associated with the financial stability of retrocessionaires are avoided.

Reinsurance Conclusion

Reinsurance has become a complex and highly technical part of the insurance mechanism that is acknowledged to be a significant contributing factor in the overall good health of the aviation insurance industry. Reinsurance allows primary insurers to manage their risks and capital in the most efficient way, making insurance more secure and less expensive. At the same time, it broadens the range of products and coverage primary insurers can offer. Reinsurance enhances the stability of the primary aviation insurers as it allows them to protect their balance sheets against unexpected adverse losses, understand assumed risks better and ensure correct risk assessment and pricing.

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AIA Closes out 2018 with Two Regional Receptions TORONTO

T

he fourth regional reception hosted by the Aviation Insurance Association was the association’s first international regional and took place in Toronto, Sept. 20. Unlike prior regional events, this session featured four education sessions which were approved for 4.5 hours of RIBO continuing education accreditation for Canada.

Speakers for the event included: • Steven P. Williams, Partner, Emond Harden, Labour & Employment Law, Marijuana + Aviation = What Could Possibly Go Wrong?

• Heather Schacker & Simon Garrett, Transport Canada General Aviation Safety Campaign • Nicolas Drolet, Robinson Sheppard Shapiro Aviate and Navigate through Aviation Insurance Claims • Ehsan Monfared, YYZlaw Hidden Contractual Liabilities and Uninsured Risks

THANK YOU TORONTO REGIONAL RECEPTION SPONSORS:

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In October, AIA was back in the states for its final regional of 2018, which was held in Chicago. This event was back to the typical regional format and featured internationally acclaimed aviation attorney, Jerry Skinner who presented, “Recovering Damages From Hostile Nations.” He shared his story of how he successfully recovered $2.7 billion against Colonel Muammar Gaddafi’s Libya for the 270 lives lost in the 1988 Lockerbie disaster which Skinner blamed on a bomb planted by Libyan intelligence officers. Now he has his sights set on recovering damages from Russia for taking down Malaysian

Airlines flight MH17 with a missile, killing 298 civilians in the process.

Following each regional event, attendees enjoyed a cocktail reception to network with peers and met the current members of the AIA Board of Directors who were in attendance.

Thank you to our local AIA members: Belinda Bryce, Alan Farkas and Mike McGrory and our regional sponsors for their assistance in making these events a success.

CHICAGO

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MAY 3-6, 2019 LOCATION:

GROVE PARK INN REGISTRATION OPENS DECEMBER 3, 2019 The Aviation Insurance Association is THE place to make the connections that matter. In addition to the knowledge you will gain from the education sessions, the available networking opportunities are what truly makes this conference the place to be for those working in the aviation insurance industry. This is the one time per year when all facets of the industry are together at once.

It is your opportunity to renew old acquaintances, build new relationships and your business.

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The 2019 AIA Annual Conference is the best venue to trade experiences, create business partnerships, and discuss the current state of the industry from each segment of the association. Network with your peers over cocktails during the opening reception and learn what is to come for the aviation insurance industry during the general education sessions.

REGISTER NOW FOR THE 2019 AIA ANNUAL CONFERENCE, AND YOU WILL BE SURE TO SEE THAT AIA CONTINUES TO BE THE CONFERENCE FOR THOSE IN THE AVIATION INSURANCE INDUSTRY!

• Educational sessions to help your business grow • Numerous networking opportunities for you and your peers • Tabletop exhibits featuring the latest industry technologies and services • The opportunity to learn from some of the most successful aviation insurance professionals in the industry The full registration fee covers conference general sessions, divisional breakout sessions, conference materials, access to the Exhibit Hall, breakfasts, refreshment breaks, lunches, networking receptions, Monday Night Party, and The Education Sessions (CIE) on Sunday. However, if credit is needed to remain in good standing with your state, a $50 fee will apply. The Continuing Legal Education sessions on Friday are also included in the full registration fee. However, if credit is needed to remain in good standing with your state, a $100 fee will apply.

SAVE THE DATE

WHAT IS INCLUDED

The one-day pass includes everything offered on the day you select to attend except add-on and special events, which require separate fees.

LODGING Lodging and Conference Location The Omni Grove Park Inn 290 Macon Avenue Asheville, NC 28804

Hotel reservations must be made no later thaN

MONDAY, APRIL 1ST. AIA’s special conference room rate at The Omni Grove Park Inn is $239 per night for single or double occupancy. Rates do not include applicable state or local taxes.

Individuals will need to first register for the AIA Conference to receive the information to make hotel reservations. Once payment is made, the hotel link will be on the thank you for registering page.

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KEYNOTE SPEAKERS John T. Brogan

Pete Bunce

John T. Brogan joined the company in 1997. John began his career as a senior accountant, then in 2001 became a general aviation underwriter in the New York office.

He has held a series of management roles, from branch manager, to Senior Vice President and regional supervisor, to Executive Vice President and manager of both general aviation and workers’ compensation departments. In February 2016, John became President and COO, overseeing all underwriting and claims departments and was named Chief Executive Officer in 2017.

In April 2005, Peter (Pete) Bunce became President and CEO of GAMA, which has North American headquarters in Washington, D.C. and European/ Middle East headquarters in Brussels, Belgium. He and the GAMA staff travel worldwide engaging regulators, policymakers, and elected officials to promote general aviation and advance the interests of GAMA’s global membership of more than 100 airframe, avionics, engine, and component manufacturers, as well as the world’s leading business aviation maintenance, repair, and overall companies.

John is active in a wide range of aviation and insurance organizations and associations. He is a member of the Aviation Insurance Association’s Eagle Society, he serves on the Flight Safety Foundation’s Business Advisory Committee, the Air Charter Safety Foundation’s Executive Committee, The Wings Club Board of Governors, the General Aviation Study Group of the International Union of Aerospace Insurers (IUAI) and is a Certified Aviation Insurance Professional.

Pete retired from the United States Air Force in March 2005, with his last assignment as the Director of the Air Force Congressional Budget and Appropriations Liaison. During his 26-year Air Force career, Pete flew F-15s and A-10s, while commanding several large operational fighter units. Pete was named the 2007 Aviation Industry Leader of the Year by the Living Legends of Aviation.

In December 2009, he was awarded the ICAS Sword of Excellence, the air show industry’s premier annual award. In January 2010, he was inducted as one of the 70 Living Legends of Aviation.

President and Chief Executive Officer United States Aircraft Insurance Group (USAIG)

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President and CE GAMA

Shaesta Waiz

Founder Dreams Soar, Inc. Born in an Afghan refugee camp, she and her family immigrated to America in 1987 when she was a young child to escape the Soviet-Afghan war. After discovering her passion for aviation at age 18, Shaesta attended Embry-Riddle Aeronautical University and earned both a Bachelor’s and Master’s degree, the first in her family to do so. Shaesta holds a commercial pilot license and is the first certified civilian female pilot from Afghanistan.

Shaesta Waiz, founder of the non-profit organization Dreams Soar, Inc., flew around the world solo in a Beechcraft Bonanza A36 aircraft in 2017, becoming the youngest woman to circumnavigate the globe solo in a single-engine aircraft. The purpose of the global flight was to inspire the next generation of Science, Technology, Engineering and Math (STEM) and aviation pro-

fessionals, particularly young girls. Shaesta flew over 24,000 nautical miles on her 145-day journey, visiting 22 countries across five continents. She inspired over 3,000 children and young adults on her global flight, hosting 32 Outreach events in 14 of those countries.

Shaesta is the recipient of the National Aeronautic Association’s 2017 Katherine and Marjorie Stinson Trophy, the Smithsonian National Air and Space Museum’s 2018 Trophy for Current Achievement, and the Royal Institute of Navigation’s 2018 Certificate of Achievement.

SCHEDULE CHANGE This year we’ve moved our Tuesday continuing legal education sessions to Friday, May 3. This schedule change will make it easier for everyone to enjoy the Monday Night Party, knowing they can sleep in and only worry about catching their flights home on Tuesday.

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CONTINUING LEGAL EDUCATION SESSIONS FRIDAY, MAY 3

Continuing Legal Education Sessions Again this year, AIA has approved sessions on Friday and the attorney/claims session on Monday up to 5 hours MCLE credits. Attending AIA’s half-day session of CLE sessions is a great way for you to earn up to four hours of legal education credits. All attendees are welcome to attend.

If you need CLE credits to remain in good standing with your state, a $100 fee applies. You must sign in and sign out to receive credit.

1:00 – 2:00 p.m.

3:00 – 4:00 p.m.

NTSB Factual Report: Admissible or Not

Lessons from the Amazon: In-Country Emergency Response in the Foreign Air Accident/ Incident Case

• W. Ashby Underhill, Coquina Law Group Discussion of split of authority on whether the factual report is admissible at trial and related issues. The applicable statutes do not bar the factual report from being used in litigation or from NTSB employees from testifying as to facts they personally observed. However, the factual reports arguably contain opinion. Courts have limited the factual testimony and reports and barred admission entirely due to the factual report containing opinion.

• Robert Torricella, Torricella Law, PLLC Using the experiences and lessons learned from the Brazilian midair collision of September 2006, the presentation will cover topics including: Accident background and post-accident events; Seizure of passports and detention of crew; Civil, criminal and political investigations; Media activities and public relations response; Security efforts; and Corporate considerations.

2:00 –3:00 p.m.

Bad Faith – The Case for a Prompt Investigation and Expeditious Settlement Offer

4:00 – 5:00 p.m.

• Elizabeth Vasseur-Browne, Cooling & Herbers

Handling Spoliation of Evidence Issues in Aviation Cases

• Michele Carlucci-Sears, Wilson Elser

• Susan Hofer, Cranfill Sumner & Hartzog • Mica Nguyen Worthy, Cranfill Sumner & Hartzog

Bad faith claims arise when an insurer fails to settle a claim against its insured within the applicable policy limits. If there is a judgment for an amount in excess of the policy limits or a punitive damage award, the insurer can be held responsible for that excess judgment if it is found to have acted in bad faith towards its insured. The panel will discuss recent bad faith cases brought against aviation insurers following aircraft accidents and incidents, and some of the ways to avoid being the next insurance causality.

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Learn the key issues on what constitutes spoliation of evidence, the duty to preserve evidence, what evidence is required to be preserved (including ESI), guidelines for preserving evidence, and how to “paper the case” to prepare a defense to avoid the dreaded “adverse inference” as a result of spoliation of evidence in aviation cases.

CONTINUING INSURANCE EDUCATION SESSIONS Sunday, May 5

Continuing Insurance Education Sessions If you are looking for a great program to fill continuing education requirements by your state, look no further. Attending AIA’s full day of CIE sessions is a great way for you to earn up to eight hours of agent/ broker credit. This course is also approved for adjusters’ credit in some states. Not all states are approved to provide credit. Please check your state listing at www.aiaweb.org to see which states have been contacted for CIE approval.

All attendees are encouraged to attend; however, if you need these CIE session credits to remain in good standing with your state, a $50 fee applies. If you need CLE credits to remain in good standing with your state, a $100 fee applies.

While these consumers are beginning to ask deeper questions about their coverages, insurance producers are responding with additional policy endorsements and benefits. Examples such as crisis management endorsements, family assistance benefits, and public relations reimbursements are now hitting the market. This session will examine recent major loss case studies and draw out the relevant comparisons, uncover any loss prevention conclusions, and illuminate predictive indicators for the future.

10–11 a.m.

GA Adoption of Airline-Style Safety & Risk Management: An Owner-Pilots Perspective Raising the Bar for Citation Safety • Andrew Broom, Citation Jet Pilots Association

8–9 a.m.

International Aviation (Re-)Insurance Market Update • Benjamin Weber, Partner Re • Selina Tvenge, Partner Re Overview of current state of the aviation insurance and reinsurance market split into Major Risks (Airline / Products) and General Aviation. The session will further embrace aspects of legal and regulatory area, supply and demand of capacity, capital considerations, coverage issues and compensation regimes internationally vs the US.

9–10 a.m.

Interesting Claims, Accidents & Incidents • Donald J. Chupp, Fireside Partners Aviation operators who have experienced a reportable incident or a major loss often emerge with a new understanding of insurance coverage.

Frequently this results in a value appreciation for coverages beyond the hull, and new expectations for their brokers and underwriters going forward.

• David Miller, Citation Jet Pilots Association Andrew and David will discuss how the Citation Jet Pilots Association has made great strides in enhancing the safety culture for Citation pilots and operators. In 2016, CJP formed a dedicated Safety Committee to engage with its members on methods and procedures for operating their Citation aircraft in the safest possible manner, and to share safety-related resources for use by its members and the broader aviation community. A quarterly newsletter called CJP Right Seat was released with thought leadership from safety experts. CJP also created the CJP Safety and Education Foundation as a charitable organization dedicated to promoting Citation safety and education. Through the Foundation, the CJP Gold Standard Safety Award was announced and the inaugural class was recognized at the 2018 CJP convention. We will discuss the details of this award and the efforts to raise the bar for Citation training and aviation learning. This was not just an effort by CJP, but also included collaboration with industry partners. Additionally, the Foundation sponsors an annual Safety Standdown with experts addressing accidents and incidents, discussing training best practices, and encouraging pilots to commit to enhanced training beyond the FAA or insurance requirements.

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Sunday, May 5

Continuing Insurance Education Sessions - CONTINUED

2–3 p.m.

Adventures in General Liability: Coverage of FBOs and MROs • John Springrose, Higginbotham Insurance Agency, Inc. • Andrea Palmer, Higginbotham Insurance Agency, Inc.

11 a.m.–Noon Additional Insured Issues: Exclusions, Aircraft and GL Policies • Glenn Vallach, USAIG For many aviation entities, it is a fundamental tenet of risk management to, when negotiating contracts with business partners, try to secure additional insured status on their contractor’s insurance policy in connection with the contract. And, of course, this is often an effective and crucial risk transfer tool. However, there are certain circumstances in aviation in which having one contracting party being added as an additional insured onto the other’s policy may have the inadvertent result of harmfully restricting coverage for both parties in a way that neither intends. This issue can arise in relation to the operation of the traditional “Aircraft, Auto or Watercraft” exclusion on CGL policies for certain hangaring and other aircraft servicing contracts.

This presentation will examine the nuances of this often over-looked potential pitfall, with references to case law, standard policy language and practical examples, in a way that can help aviation entities, as well as their attorneys and insurance professionals, be more informed in this area going forward.

Insuring a Fixed Base Operation is not the same as insuring a Maintenance, Repair, and Overhaul operation – and even when the type of operation is the same, needs will vary with every client. While it’s impossible to insure against every eventuality, experience will guide us in assembling the right mix of coverage.

This presentation will provide an overview of the types of coverages available to operators of FBOs and MROs, explore the differences in coverage needs, and discuss potential strategies for avoiding gaps in coverage.

3–4 p.m.

Aviation Professional Services (APS) Liability Insurance Overview • Nicholas Methven, Global Aerospace, Inc. This session will provide an overview of aviation professional services liability insurance and will focus on how it relates (and how it doesn’t) to other aviation insurance policies. It will also cover unique policy features, prospective clients and other considerations.

1–2 p.m.

Pilot Shortage – Industry Challenge and Solutions

4–5 p.m.

• Amanda Ferraro, Aviation Safety Solutions, LLC

Back to the Future of Aviation Insurance

• Robert Werderich, Illinois Aviation Academy, Inc.

• Luke Uithoven, Kimmel Aviation Insurance

The airline industry is hiring pilots at a record pace.

Global demand means that more than 600,000 new pilots are needed between now until 2035. While salary and earning potential have exponentially increased, the industry is challenged to recruit the next generation. We will address barriers to entry for training new pilots and how flight schools and airlines are attracting new talent. How is this impacting Pt. 91 corporate flight departments and Pt. 135 air charter companies? Is safety being sacrificed in light of reduced hiring standards. This presentation will examine trends leading up to the pilot shortage and what is being done to address the issue on several fronts.

• Britt Kral, Hallmark Aerospace • Walter Voights Von Forster, Munich Re This panel will explore the thoughts and ideas of young(er) professionals in each segment of the Aviation Insurance industry as it relates to the future of our industry as a whole. Customers, employees, technology, and law are all currently changing at a rapid pace and 20 years from now, will likely look very different. Are we willing to adapt to the changing world around us and succeed or do we get passed over, reluctant to change?

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SCHEDULE AT A GLANCE FRIDAY, MAY 3 1 – 5 p.m.

Continuing Legal Education sessions

1– 2 p.m.

NTSB Factual Report: Admissible or Not

· W. Ashby Underhill, Coquina Law Group

2-3 p.m.

Bad Faith – The Case for a Prompt Investigation and Expeditious Settlement Offer

· Elizabeth Vasseur Browne, Cooling & Herbers

3–4 p.m.

· Michele Sears, Wilson Elser

Lessons from the Amazon: In-Country Emergency Response in the Foreign Air Accident/Incident Case

· Robert Torricella, Torricella Law PLLC

4-5 p.m.

Handling Spoliation of Evidence Issues in Aviation Cases

· Susan Hofer, Cranfill Sumner & Hartzog

· Mica Nguyen Worthy , Cranfill Sumner & Hartzog

SATURDAY, MAY 4 8:a.m.–2 p.m.

AIA Golf Tournament and Lunch for Golfers

7:30 a.m.

Sporting Clays Departure

8:30 - 2:30 p.m.

AIA Sporting Clay Tournament

8 – 10 a.m.

Women in Aviation Event

4–5 pm.

Education Committee Meeting

5:30–6 p.m.

New Member/First-Timer Reception

6–7:30 p.m.

Opening Reception

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SCHEDULE AT A GLANCE

SunDAY, MAY 5 7–8 a.m.

8 a.m. – 5 p.m.

Breakfast with Exhibitors Continuing Insurance Education Sessions

8–9 a.m. International Aviation (Re-)Insurance Market Update

• Benjamin Weber, Partner Re • Selina Tvenge, Partner Re

9–10 a.m.

Interesting Claims, Accidents and Incidents

• Don Chupp, Fireside Partners, Inc.

10–11 a.m.

GA Adoption of Airline-Style Safety & Risk Management: An Owner-Pilots Perspective Raising the Bar for Citation Safety • Andrew Broom, Citation Jet Pilots, Inc.

• David Miller, Citation Jet Pilots Association

11 a.m.–Noon

Additional Insured Issues: Exclusions,

Aircraft and GL Policies • Glenn Vallach, USAIG

Noon–1 p.m.

Lunch

1–2 p.m.

Pilot Shortage – Industry Challenge and Solutions • Amanda Ferraro, Aviation Safety Solutions, LLC • Robert Werderich, Illinois Aviation Academy

2–3 p.m.

Adventures in General Liability: Coverage of FBOs and MROs

• John Springrose, Higginbotham

Insurance Agency, Inc

• Andrea Palmer, Higginbotham

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Insurance Agency, Inc

SunDAY CONTINUED 3–4 p.m.

APS Insurance Overview • Nicolas Methven, Global Aerospace

4–5 p.m.

The Future of Aviation Insurance

• Luke Uithoven, Kimmel

Aviation Insurance

• Britt Kral, Hallmark Aerospace

• Walter Voights von Forster, Munich Re

MONDAY, MAY 6 8–9 a.m.

Breakfast with exhibitors

9 a.m.– 12:30 p.m.

General Session

9–9:15 a.m.

President’s Welcome

9:15–10:00 a.m.

John Brogan, USAIG

10 –10:15 a.m.

CAIP/CAIP Gold Award

10:15–10:30 a.m. Break 10:30–11:10 a.m.

Pete Bunce, GAMA

11:10 a.m. –12 p.m.

TBA

12 –12:15 p.m.

Pinnacle Award

12:15 – 1 p.m.

Lunch

1 – 1:45 p.m.

Shaesta Waiz, Dreams Soar

2–4 p.m.

DIVISION SESSIONS

Attorney/Claims: Mitch Garber, ESi

Agent/Brokers

6–9 p.m. Monday Night Party

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RATES AND FEES Registration Fees:

Through February 1 After February 1

• AIA Member

$695.00

$745.00

• Nonmember

• One-Day Pass

$1,050.00

$1,100.00

$575.00

$575.00

• Speaker Rate

$500.00

$500.00

• AIA Member Tabletop

$850.00

$950.00

• Nonmember Tabletop

$925.00

$1,025.00

• AIA Member Pop-up Booth

$1,725.00

$1,825.00

• Nonmember Pop-up Booth

• Booth Personnel/Member

$1,975.00

$2,075.00

$600.00

$650.00

• Booth Personnel/Nonmember

$900.00

$950.00

• Guest Meal Package

$300.00

• Guest Opening Reception

$75.00

• Guest Monday Night Party

$200.00

• Continuing Insurance Education Credits

$50.00

• Continuing Legal Education Credits

$100.00

• Golf

$275.00

• Golf Club Rental

$75.00

• Sporting Clays Tournament

$200.00

Add-on and Special-Event Fees

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GETTING TO

ASHEVILLE

FLY

The Asheville Regional Airport (AVL) is 17 miles from the Grove Park Inn. According to a recently released study by the Massachusetts Institute of Technology International Center for Transportation, Asheville Regional Airport is the best-connected non-hub airport in the United States.

Here are some major US hubs you can catch non-stop flights and easy connections from: • Atlanta (ATL) • Newark (EWR) • Chicago (ORD) • LaGuardia (LGA) • Charlotte (CLT) • Greenville-Spartanburg, South Carolina (GSP) Direct from London

TRANSPORTATION

The Grove Park Inn does NOT provide a shuttle service to or from the airport. The hotel recommends that guests rent a car or take a taxi or Uber to the hotel.

PARKING AT THE GROVE PARK INN Valet (standard parking rates):

Guests can drive up to the main entrance at The Omni Grove Park Inn and be assisted by a valet for $22 for overnight guests and $15 for day guests.

Garage Parking (standard parking rates): Garage parking is available to our day and overnight guests. The first (3) hours are complimentary, 3 – 6 hours is $10 and 6 – 24 hours is $15.

You can also catch service from Orlando (SFB), Ft. Lauderdale (FLL), St. Petersburg/Clearwater (Tampa Bay area) (PIE), Palm Beach (PBI), Ft. Myers/Punta Gorda (PGD)

DRIVE • 50% of the U.S. population is within 600 miles of Asheville • Asheville is conveniently located at the intersections of I-26 and I-40 • Asheville is easily accessible via the scenic Blue Ridge Parkway

CLIMATE Asheville is a four-season destination. Think comfortable summers, crisp autumns, mild winters and glorious springs In fact, Asheville’s temperate climate and clean mountain air have been a featured attraction for generations of visitors.

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PRESIDENT PAUL HERBERS Cooling and Herbers pherbers@coolinglaw.com

VICE PRESIDENT JAMES GARDNER The James A. Gardner Company, Inc. Jim.Gardner@jagardner.com

TREASURER JON DOOLITTLE Sutton James, Inc. jdoolittle@suttonjames.com

SECRETARY ERNEST DE SPAIN W. Brown & Associates EDeSpain@wbais.com

DIRECTOR OF CLAIMS DIVISION STEVE TELLER Aviation LS steve.teller@aviationls.com

DIRECTOR OF INTERNATIONAL DIVISION BRUCE CARMAN Hive Aero bruce.carman@hiveaero.com

DIRECTOR, UNDERWRITERS’ DIVISION GREG STERLING

DIRECTOR OF THE AGENT & BROKERS DIVISION CHRISTOPHER ARNOLD,

AIG greg.sterling@aig.com

Sutton James, Inc. carnold@suttonjames.com

DIRECTOR OF REINSURANCE DIVISION WALTER VOIGTS-VONFORSTER

DIRECTOR, ATTORNEYS’ DIVISION NICOLE WOLFE STOUT, ESQ

Munich Re WVoigts-vonForster@munichre.com

Strawinski & Stout, P.C. nws@strawlaw.com

DIRECTOR ELECT, ATTORNEY DIVISION TED DUNLAP RTI ted.dunlap@rtiforensics.com

DIRECTOR-AT-LARGE CHRISTOPHER MORIN Murray, Morin & Herman cmorin@mmhlaw.com

DIRECTOR-AT-LARGE LUKE UITHOVEN Kimmel Aviation Insurance Agency, Inc luke@kimmelinsurance.com

AIA EXECUTIVE DIRECTOR MANDIE LOROFF Aviation Insurance Association mandie@aiaweb.org

AIA BOARD COUNSEL RAY MARIANI Murray, Morin & Herman raymarianilaw@gmail.com

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SAVE THE DATE

ASHEVILLE 2019 AIA ANNUAL CONFERENCE MAY 3-6, 2019